Construction Sector Q4 Preview — Revenue Visibility Supported By Healthy Orderbook: Nirmal Bang

Nirmal Bang Report

We anticipate a strong Q4 FY23 for the construction industry, as execution is anticipated to improve and falling input prices (cement, steel, bitumen, and sand/aggregates) are likely to boost construction businesses' profits. We predict that the National Highway Authority of India will continue to grant between 6,000 and 7,000 km/year on average between FY24 and FY27.

In addition, it is anticipated that the proportions of hybrid annuity model, engineering, procurement and construction, and build-operate-transfer in project awarding would stay essentially consistent without substantial deviations (55% of projects granted through HAM in FY22 are projected to remain stable).

Construction sector is fragmented with ~1,200 players(listed and non-listed), out of which top 50 listed companies in civil construction space (Bloomberg) recorded trailing twelve months revenue of Rs 1,206 billion; only six companies have revenue share which is between 5-8% compared to the average 2% market share of the universe.

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